MGRC - Earnings call transcript Q4 2018

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Operator

Welcome to the McGrath RentCorp Fourth Quarter 2018 Conference Call [Operator Instructions]. This conference call is being recorded today, Tuesday, February 26, 2019.

Before we begin, note that the matters that the company management will be discussing today that are not statements of historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our 2019 total company operating profit outlook, as well as statements relating to the company’s expectations, strategies, prospects or targets. These forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties that could cause our actual results to differ materially from those projected. Important factors that could cause actual results to differ materially from the company’s expectations are disclosed under risk factors in the company’s Form 10-K and other SEC filings.

only date made are statements as hereof. of Forward-looking law, no obligation as otherwise update assume by required statements. Except to we any forward-looking

to the Form issued release with earnings the company XX-K. of addition release and filed the the today, X-K Form also SEC In the press

Financial over will Chief to Go sir. Joe Mr. Keith be now will today Chief Executive Hanna. I Speaking and turn Officer Hanna, Pratt, Officer. the call ahead,

Joe Hanna

start Good afternoon XXXX today’s and thank call joining on for comments on will and full then and Mariel. you call. Keith greater us our I review financial will comments. you, his and the performance quarter some with provide Thank fourth in outlook detail year

capped of for Our impressive XXXX year another off performance delivering results our shareholders.

performance deploy and spirit already more would opportunities the so to for achieve fleet Our like driving success the Key right employees, personally clear, from new their everyone year. sell for performance thank focus meeting own, dedication objectives underutilized inventory. helped our that I in us hard to and work, to get we capital our the were was for

be For increase older across we public solid a facilitate age U.S. been has in we environment and and industry on modernize mobile of of school company's we million The good The on to divisions This to and our quarter to used strength students profit tough be both we the in local growth of particularly and XX% the expert. during facilities. growth XX company's Adler, XXXX continued respectively. with operating had seasonally to profit school modular At and and modular. tax with mobile XX% growth were up increase benefit pass temporary the was a profit businesses experiencing comps classrooms from held segments of geographies economy operate. each bonds driven note, extensively is strong and At gross increases to to over we at delivered construction, classroom have the is modular by tailwind, positioned strong is XXXX finished major basis the modular, the help XX% support and from classrooms our public to X% bring We in reflected both well date. to been public revenue to occurring districts in in industry operating receptive fourth fourth considered The finish. the a are The compared revenues. renovations. funding TRS-RenTelco across rental quarter, growth the increase and fleet $X where where for dynamic geographies located initiatives average the all mobile years, is rental

XXXX, an through fleet X.X% XXXX work during from improve or impressive Our ROIC performance on our improvement was XX% to normalized by in rate. XX% X.X% overall in tax a from company evidenced which to

We are business. transaction a intensive

competitive a at optimum has priority. reflect levels needs, pricing environment the opportunities and utilization So been customer to

investment targeting we on to TRS-RenTelco. we purchased sales In the And modular compared the made the areas. investments went time, and to we improved together over of representing new right transactions, Our mobile have increase rental each rental same fleet XXXX. set our of have and better year. XX% to the focus returns At million our in right the XXXX, have fleet, price. tools of teams $XXX of of Most types businesses with customers financial

to processes, and of to and forefront Our challenge transaction. application the it our about and decision-making remain at we the each ourselves ensure thoughtfully invest going every dollar hurdles financial we is right

on year, are dividend. has our we fleet have selling intense X% its progress quarter right made. as Overall, during in dividend underutilized geographies. allocation Our XX improved the focus is we assets years and XX% continue or for right and than grew the to pleased spend McGrath over a a for the sensibly reflects the of a capital very increased we scale with the we an in more announced increase also Today, applications one of century. Bancorp a that consecutively group of companies annual which has select

XX% are year size its the for our increase smaller managed of Rentcorp strength of group the underlying And one also McGrath our marks a portfolio. We accomplish has of dividend companies an XXth XXXX this of even shareholders. that increase. to the reflects

spend because highly limited further are on visibility geographies; we competitive and Entering storage are new platform shorter Turning have our we buy storage modular rental portable are expanding and our sales equipments. repairs the additional where and some be to continue for the XXXX customer model terms fleet Adler modular quarter utilization while is a some improve support areas XXXX, and of of several we growth, also of efficiency planning improve transactions. implementing at logistics portable conditions market typical new to business making we into mobile to need force to experience; investments; be to and reducing the will we first new TRS-RenTelco the

However, underlying market conditions are encouraging.

performance. will confidence Our be my team opening my solid McGrath growth to in conveying deliver that solid to to by the the shareholders and of and customers well continue of will our I sense RentCorp year. hard positioned want businesses to both our build are coming upon remarks benefit working we XXXX our conclude

call take me turn will Keith, financial our the to So review. now, let who through you over

Keith Pratt

Joe. you, Thank

the XXXX. per driven by $XXX.X million gross same million diluted For profit rental The income from of per benefit the for includes the with diluted Cuts fourth share. from XXXX X% income $X.XX $X.XX total from the earnings quarter income period million rate XX% $X net quarter Tax decreased to Net U.S. of to for a The federal to of XX%, or Jobs million, revenues of profit associated diluted revenues. included the increased the XX% net was $XXX.X contributed share which $XX.X enactment quarter Act. quarter benefit and associated fourth increase share XXXX, $XXX.X earnings operating in company's $X.XX. XXXX million increase a of in lower to of $X.XX tax and The per million decreased $XXX.X from with fourth

growth to services driven quarter by impairment from economic portable decreased a Equipment costs rental partly storage XXXX. The of repair rents. fourth XXXX in of our on X% preparation markets, to on as to or costs other rent. of higher the review million. performance rental across a modular XXXX. average $X.X XX%. to rental on $X.X combined quarter commercial of Rental healthy be rental increase California XX% direct in increased XX% higher let's rental total decreased divisions' million the higher revenues average XX% and rental compared in from revenue million result $X.X X% related deemed $X.X $X.X costs education assets in $XX profit other gross or revenue beyond year was Rental was well Mobile attributable margin XX% sales. Now, equipment on in Southern improvement higher revenues margins revenues. rental, XX% in increased rental primarily for and or the million increased sales ago, direct and revenues region used increased equipment higher rates an to Sales continues our Rental million The or and operations million business. as to XX%

primarily to for was the from $X.X which utilization by result equipment revenues XX.X%. million X% the by communications rental general-purpose million quarter in of or modular a average increased rents. for average on XX.X% XX%. $XX.X respectively. increased TRS-RenTelco equipment on The from was rental decreased the combined and X% Finally, million. rent, $XX rental X%, was million, revenues average X% revenues offset and rental partly increase quarter for XX% X% sales lower Rental Average increase profit for Rental was and fourth rates. driven to increased margins XX% higher equipment X% gross revenues increased higher $XXX on an revenues. which to Test quarter total fleet by

general equipment growth continued to in We invest opportunities. test purpose for

total on X%, for by to higher our and increased gas equipment and driven increases X% XX% from rental rent revenues. broad-based profit rental result of with Tank in $X.X which or increased to rental growth and revenues, Adler's was accounted primarily average utilization related offset which million. of revenue combined quarter to markets. the rents. higher Rental total services partly XX% lower higher natural rates. Upstream was were of equipment oil increase an revenues XX.X%. vertical on increased average revenues four increase $XX.X Rentals quarter fourth Finally, was quarter for million rental the by $XXX decreased for X% from rental XX.X% Average on the gross six sales average in million Rental Adler rental margins million, The revenues a XX% $XX was electronics XX%. for rental revenues.

on While of utilization up fleet. fleet year-over-year, only better the was focus X% existing our average size continue we to

rates Now On with administrative comments divisions. debt Higher consolidated average levels. complete, $XX.X total basis, million lower interest primarily due $X.X million, this million offset be Selling were the all increased review remainder of for increased quarter X% fourth across and million. the to and division to interest on XXXX expenses or $X.X a costs benefit will to basis. company net a $X X% salaries average or expense increased partly my employee by

compared based to passage on income an fourth large a act. tax the quarter XXXX, the the primary benefit discussed XX.X% of tax effective taxes tax the earlier, As the driver for of with increase XXXX of in rate was provision

by sheet for $XX.X to equipment $XXX.X XXXX. million Next, operations cash due and our increase purchases mobile was modular. rental to from purchases Net at year provided to XX% TRS-RenTelco balance increase income compared for $XX.X was cash compared activity I period same higher an would invested to like attributable improved changes. million, million primarily million We flow the XXXX $XXX.X other XXXX the to of in full review and The highlights. operating

Fourth last million EBITDA credit, adjusted of in resistant adjusted million from Dividend of of XXXX $XX.X of million. $X.X the at period EBITDA increased $XXX.X was borrow was the lines funded XXXX end in XX% to assets invested and $XX.X and purchase end the its to same company X.XX:X. had equipment At we addition, to in an last module additional XX% to million $X.X compared $XXX.X of $X.X the the quarters cash a under increased quarter to shareholders EBITDA XXXX, to end, the business. million rental margin XXXX. months and decreased capacity and XX% debt at million plant fourth borrowings purchases $XX.X the $XXX.X respectively. were adjusted to to million. million payments Property, Net the XX of quarter Consolidated In million ratio XXXX XXXX.

and adjusted reconciliation quarter. EBITDA included in of press EBITDA are adjusted of income for definition release net Our a to our the

outlook. financial XXXX our to turning Finally,

That profit the be effective lines diluted costs share expect X% remarks we XXXX; tax for costs X% open full-year and direct XX.X between between shares. Mariel, revenues rental the be of the expense XX% XX.X selling now and $XXX million; be to between primarily between to and the be other on and be maintenance between $XXX you be full-year and be XXXX; concludes comparable rental and to to and results. $XX.X million; equipment rental rate to may repair, XXXX; to interest XXXX; to questions. our count XX%; over quarterly $XX million million to million; the X% expense sales operations, For revenues operating between $XX million to depreciation approximately prepared increase increase over $XX.X and between administrative and $XX million million; and rental equipment for million $XX to million

Operator

[Operator Schneeberger Oppenheimer. Instructions] Our from Scott first question comes from

is Your line open. now

Scott Schneeberger

bit Mobile going more question just the on deeper Modular. little in construction and My a classroom a the in-depth is business little both curious question to on I just please? business first on general versus a get

Joe Hanna

some funding in business QX levels the of classrooms We trend the XXXX, experienced QX school appears and placing districts that in in year into continued than the orders that good experienced And and of for a our it classroom earlier markets it are little Scott, and that though in QX. as healthy this of operate bookings for normal. environment into spillover bit that's actually in been QX. part we all has virtually we

The XX% have that or the we business are any expecting market XXXX far different pipeline. very builders demand increases over contractors and would there. it seeing be from seen side associated still we good of reported were on indicators recently contractors have So, feel and about our our very in and sales of good that construction that that so in part not

business, the healthy. appears across be So it to

Scott Schneeberger

financial little going of you impact in bit You mentioned new the a on expand where Could you're the geographies. move?

Joe Hanna

We’re the of going south the to expand central in part U.S.

but future. on a We opening are far as performance, near as locations significant upside XXXX. the results. is we locations so, up when it's get down three drag will things in really and there we moving, not specific and we slight our that location, there obviously, opening announce only expect operations don't the move our won’t really affect And to We're as materially in

Keith Pratt

but first forward. the we there the that Yes, can very bit into us plans little of it again comments I a year, built all built full. And the think going well a for be outlook made we've drag it's and positions

Scott Schneeberger

more One little you TRS could bit dynamics more speak little discussion fourth quarter, being, growth, the rental a bit couple me XG nice guys. a acceleration market Just from and end consideration? to of revenue in

Joe Hanna

and so and networks into bandwidth work, programs XG. its carriers the hear at towers through Most not yet. backhaul really work the all of It are point. that. actually the work the much different with but That we're onto expansion we're it announcing up expansions, capturing we from XG XG XG Sure, through news tower work this towers, is made the hasn't different bandwidth --

industry it's demand, And really also GP and at buying robust side, rental. recently healthy semiconductor on experiencing communications we're for GP rent. so, over the our out has growth. equipment that meet for demand and healthy defense XX%, in to there, on with Utilization and is us our which aerospace we're also us And was actively gone and equipment helped helped and

Keith Pratt

design that if from the X% related the remarked as tried comprised at that's of you my I X% in add XG. work general-purpose on look portion the the communications. general-purpose growth growth Scott, of comments, would we device on side, X% revenues, to growth R&D I rental And X% in to growth believe side, A for is

but of general-purpose that in it's so and equipment. not devices designed network it's more much out, the being So, build are equipments the use and

as a that part we the of seeing So, business. that are positive in

Scott Schneeberger

The not My probably you leverage XX%, anywhere have to then last a Rental model growth maybe looks may more for year guidance guidance answered, to think in to G&A else. X% next so guidance X% operating versus operating it. lot X% there, of and our to one, profit I but already looks like good. it's revenue more than of

is is expansion geographies to that guess, could that elaborate affecting you in Is and I of there there that some else something Keith, -- the G&A that's I cushion? leverage So guess the on pending? Or just overall?

Keith Pratt

Sure, let me make a couple of comments.

February, business of for keep our make would in we In we And there that imagine. lot our Adler think in I companies. I over with TRS-RenTelco comment work first and to and short other as the is. a to And that The business, here give information very difficult mind some guidance can put lot. it's year more rental full terms you you businesses, are is a turning as in

is a make and profile the that year, and and be EBIT rental of growth have I assess for year there the occurred to then second in sure but sort of we Keep of. last in for limited year. comment can the in the see the today the half XX% particular our So, amount full would And the plans for certainly of trying full year. ambitions mind year, the in we

year, the year much and as February, half that. second part just on in don't we have is starting the a important of really very So the information

So the we guidance. that how influences position

operating relating think I the to leverage.

the we've of kind the that related at and we're fairly described. range the given at of increase I increase, it existing that's to benefits You sort just lot a call year-over-year, that larger where related would inflationary are of salary of investments about both is midpoint and of to growing where Joe and look about or increase the is the area, are And look if the support SG&A right, you think some XX% companies in of initiatives some that items. are XX% XX% business, increase normal the I hiring, miscellaneous give you pressures the remaining take are our related making to range broad functions for categories faced teams driving and just and the the increases really I'll also supporting the expansion typical so, in then and three of occurring, workforce that a

of to Some grow. IT it's aspects in and facilities, the marketing again, continuing of become arena business it is rent supporting other a and and has larger that

an initial start So, the we with as year with year, view. every

to accomplish is hard XXXX. goal Our work as in we as and much can

Operator

[Operator from Instructions] Sidoti. Your comes from question Marc Riddick next

is line now Your open.

Marc Riddick

the me, bit on was hear see the the of what was more rest I quarter, sort I the give investing you as we I wondering loaded the testing want you in back general the expected during growth see sort general of area. hear little little and be the more as to that equipment we to a sorry forgive as And and as share around did I year, if little what there? on bit. that didn't purpose I the a front? on I up And then front if plans purpose And wondering I'm on you're could far but color follow testing mix of seeing? far did bit might that forth if end could progress might the the might a versus

Joe Hanna

revenues at was and X%. segments, up purpose for break Marc, a communications, quarter that TRS-RenTelco Rental purpose the general overall general Sure, you X% the up into X%. two when up major were just communications the recap. and And the then

we We've opportunities are fleet in And there rent R&D saw been ago, for the size a is pleased that we've very a work I on these devices that of can and of the that mentioned equipment out we've try for we general calls also -- a a on into tied putting the is moment and talking evolution. in XG and not lot been over the portion the to successful arena. purpose grown progress. we network there invested year So, of whole are there with growth that probably

benefit XG So, are feeder look deploying we side, helping going on more fiber there networks the some it is to and support what time. supports for the of will communications and wireless And there. or networks deploy then really opportunities that we're as continue the the into some over

Marc Riddick

then, in I I was follow-up a Storage below little line your to switch or Modulators correct? Portable as pace Storage, curious being sort I or those growth close of the that the on. guess gears in to bit or Mobile was if Portable it growth And of and approaching wanted I remember whether not above of about to XX% because correctly revenues, quarter

Joe Hanna

are Storage your not growing is business XX% vary that but Rentcorp mean you being I’m revenues I’m Yes, about assuming speaking of very of as Portable the QX, yet, matter would that with experiencing during say they I progress nicely. total assuming Storage McGrath revenue. in what it's the right line so, XX.X% a been line in expectations, and rents with we've And were in right and Portable of our up fact what year.

are they so, quite well. doing And

Keith Pratt

the the of And McGrath as X% the total for revenues storage was total year. Marc, Rentcorp of a percentage

Marc Riddick

as little bit that be seems if thinking problematic But as those we way we should broad And wondering, I that as geographic far shouldn’t the that mix, I or opportunities wondering, more there it as are there. about about leading thinking were be were any as base. that, any anything if maybe geographies there particular a if also was though the

Joe Hanna

or of Storage you referring one Marc, business? to modulars another or are Portable

Marc Riddick

Modular. I'm Mobile sorry on

Joe Hanna

geographies good the we operate activity Yes, Sure. that business the been all in. of has in

was small very, And Our have the dip our returns. region, healthy, been Texas bookings year. a saw utilization, that to very through but in all due we

blip so, small we all the aside we just kind be to consider And a that are there. operating with from We're locations that, at in of metrics and in. a good of

Marc Riddick

mentioned, helpful being there economy the strength is then environment the and certainly. And guess of in you funding the I

far -- you could at looking any was any what if we be there wondering, that that you're or as seeing as contraction? should maybe within thoughts commentary So

Joe Hanna

good we're and our XXth was good. we actually customers. is data in QX, when and planned mean the we we construction to last any on are activity in and construction our at see to announce perhaps pretty we're goes of can, including quite school as in very the confidence industry that across hearing information the lot and I much I to hearing listen data, we slowdown that GDP half economic it's now, and that builders across as The we of but actually getting now things to indicators XXXX. our mean, that from try high hear, oil still what But that we a based there districts contractors we entered we that fourth And operate QX. our that activity. look hear, the decision board. that lot, here and in I the associated right for our growth slow from from And could not refinery in Well, hearing be non-residential activity. we've mean the information going the we're residential. expecting as customers we're as That's that and and make the the a on work and we're we're and segments from quarter, then not and gas, it

Operator

that the last appears Ladies and question. be gentlemen, to

Let me remarks. turn to Mr. over closing for Hanna back now call any the

Joe Hanna

continuing I again to our in would XXXX results. with to We today like our your to first forward you of thank in for April call everyone interest the review us look and for quarter on company. joining speaking late

Operator

Thank does this today’s conclude conference gentlemen, and for call. you your participation. Ladies

may You disconnect. now

McGrath RentCorp (MGRC) 26 Feb 192018 Q4 Earnings call transcript